Royalty and technical know-how fees are excluded from import value absent nexus with goods and a condition of sale.

Royalty and technical know-how fees payable under a know-how agreement are includible in the assessable value of imported goods only if they relate to those goods and are payable, directly or indirectly, as a condition of sale. On the stated facts, the department did not establish that the royalty was a pre-condition for sale of the imported goods or that the transaction value was not the true value under Section 14(1)(a) of the Customs Act, 1962. The payments were linked to manufacturing operations in India and lacked a sufficient nexus with the imported goods. They were therefore not includible in assessable value.

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Issues: Whether royalty and technical know-how fees payable under the know-how agreement were includible in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: Royalty can be added to the assessable value only where it is related to the imported goods and is required to be paid, directly or indirectly, as a condition of sale. The department failed to establish that the royalty here was a pre-condition for the sale of the imported goods or that the transaction value was not the true value under Section 14(1)(a) of the Customs Act, 1962. The royalty and technical know-how payment was connected with manufacturing operations in India and had no sufficient nexus with the imported goods to justify inclusion in their assessable value.

Conclusion: The royalty and technical know-how fees were not includible in the assessable value, and the departmental appeal failed.

Ratio Decidendi: Royalty or licence fees are includible in the value of imported goods only when they are related to the imported goods and are payable as a condition of sale; absent such nexus and condition, they cannot be added to the assessable value.

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